The turnover of Italian manufacturing increased by 3.2% at current values in the January-November period and by 1.9% net of the increase in prices (+1.3% on average for the first eleven months of 2018), largely sustained of the year by increases in production inputs. Manufacturing production also closed the first eleven months of the year only moderately expanding (+2.1%), being in line with the turnover trend at constant prices. This is what emerges from the Analysis of Industrial Sectors, a study published by Prometeia and Intesa Sanpaolo, which nonetheless shows signs of attenuation of growth starting from the summer months, which reflect a progressive deterioration of the operating context. “Domestic demand has lost momentum, especially in terms of investments in machinery and durable consumption. Foreign demand was the driving force, albeit in a context of slowdown in export growth rates, consistent with the trend in international trade”, explains the research.
AUTOMOTIVE CRISIS
The slowdown phase, common to the main EU players, is driven by the automotive sector, mainly due to the new vehicle type-approval procedures, which have generated tensions on the systems, lengthening delivery times. The purely temporary factors were then added to elements of a more structural nature, on the demand side, such as the progressive and physiological depletion of the durable component in household purchases and the disaffection towards diesel engines, which foreshadows an acceleration in the transition process towards electric. The automotive shock, according to Prometeia and Intesa Sanpaolo, had a significant impact on growth in all European countries, also spreading to sectors positioned upstream of the supply chain: metal products, rubber-plastic, chemicals. The latter was also penalized by the volatility of oil prices during the year and, in Germany, by bottlenecks on plants caused by the dry of the Rhine.
Also in Italy, therefore, the main factor holding back growth in 2018 came from the automotive sector, which recorded a -1.7% final balance of the first 11 monthsboth in terms of production and turnover. On the other hand, twelve sectors out of the fifteen analyzed present a positive evolution of turnover in 2018, albeit in a scenario of generalized slowdown, in comparison with a more brilliant first part of the year. Among the best performers stand out Electronics, Pharmaceuticals and Mechanics, above all thanks to the driving force of foreign markets. The performance of the metal supply chain (Metallurgy and Metal Products) was also above average, sustained, despite the car slowdown, above all by mechanics, but also by a price effect: metal prices continued to grow during the first half of 2018. The increases in the prices of energy raw materials, on the other hand, supported the turnover of chemical intermediates, especially of basic chemical companies.
The evolution of the turnover of the fashion system (more lively in correspondence with the leather, tanning and footwear supply chain) and in the Electrical Engineering (where different situations coexist; the lighting and the components closer to the automotive are less bright). The growth of Furniture was more moderate (among the few sectors, however, not to have been affected by the slowdown in the second half of the year), of Other intermediates (automotive is the main driving force of the rubber-plastic sector), of Food and beverages and construction products (conditioned by a recovery in the construction cycle that is not yet solid). The FMCG sector is not very dynamic. Household Appliances are still in difficulty, due to a greatly reduced production base, which is showing difficulty in intercepting demand.
PERSPECTIVES 2019
Leading indicators agree in painting a picture of further deterioration of the Italian manufacturing operating environment during 2019, starting with orders, which offer a summary of short-term prospects. Total orders show a moderate increase overall in the first eleven months of 2018 (+2.3% yoy), but with a retreat in the final months of the year. Domestic orders slowed down the most (+1.5%, January-November), against a greater dynamism of foreign ones (+4.4% in the same period). From a sectoral point of view, however, the cooling of orders mainly concerned motor vehicles and motorcycles, mechanics and pharmaceuticals (relating to the latter, above all in the foreign component).
Not encouraging signs also emerge from the trend of the business confidence index, with a negative trend common to all European countries. In particular, the sentiment on demand and production worsens, deriving from concerns connected both to the national economy and to the international scenario, full of unknowns. In fact, world trade could decelerate significantly if tensions on the tariff front were to flare up again (eg failure of the negotiations underway between the United States and China). The uncertain outcome of the Brexit negotiations is also weighing on the European economy. The picture of high uncertainty it also penalizes the investment plans of companies. The indications emerging from the Bank of Italy-Sole 24Ore survey confirm a worsening of assessments on investment conditions, with a balance in negative territory at levels similar to those observed in 2013.
